Indian IT could bag a big slice of $160 billion tech deals in Q1 2023

Indian software exporters could win a dominant share of the estimated $160-billion worth of IT deals that will come up for renewal in the first quarter of 2023, analysts tracking the sector said.

Indian IT services companies could corner a hefty slice of the multi-year deals ranging from $100-500 million that will be up for grabs, they added.

This comes as global corporations look to consolidate technology spending with fewer vendors and reap the benefit of better pricing amid worsening macroeconomic conditions.

The value of the new deals could amount to nearly a fifth of the global IT services business valued at $800 billion, according to Ray Wang, founder of Silicon Valley-based Constellation Research.
“We see large deals coming back in Q1 (FY24),” Wang told ET, adding that the deal nature is not confined to sectors such as banking or retail, and that there could be “deal consolidation,” in 2023.

The bulk of the deals will come from American corporations, with a few from Europe and the Asia-Pacific region, even as high inflation and recessionary trends in the US and Europe are pushing software buyers to consolidate spends, with financial services and consumer goods companies on top of the pile.

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Large outsourcing deals have been the bread and butter of Indian IT. In the post-pandemic era, clients are now more open to deals they had put off for over two years, software exporters said.

HCL’s CFO Prateek Aggarwal told ET that several clients who were just “extending the old deals with existing service providers” are now in the market looking for new service providers.

“They did not want to take the risk of changing vendors in the middle of a pandemic. But now most customers are through with Covid, and, obviously, there is a need for savings to feed either the digital work or the growth work they want to do,” Aggarwal said.

C Vijayakumar, CEO of the company, quoting ISG, said a vendor consolidation opportunity valued over $122 billion would emerge over the next 2.5 years.

Mails sent to TCS and Infosys remained unanswered as of press time.

Tech Mahindra CFO Rohit Anand said the company’s large deal pipeline is ‘one of the best’ over the last five years, as the company focuses on growing regions such as 5G and customer experience management, among others. Cognizant said it was seeing some large deal opportunities as companies “reimagine their workflows and business processes with automation.”

In response to ET’s queries on which segments would drive large deals, the company said: “We believe digital transformation will fuel growth of the IT industry in years to come and expect vendor consolidation to continue for a period of time to address demands for cost efficiencies, automation.”

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